Why Do Startups Outsource?

Learn the reasons why companies outsource. Discover the advantages and peculiarities of this type of development that drive business growth and competitiveness.

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Did you know how many startups are in the market? Demand Sage analysts say it’s over 150 million. The statistics also note that the average cost of starting a business is $40,000. However, only 1,361 startups have achieved unicorn status. Perhaps, that success was due to business IT outsourcing.

Every company entering the market in 2024 should have IT solutions for:

  • Corporate needs.
  • Commercial activities.
  • Customer communication.

Those who refuse to digitize their brand might be on the fast track to nowhere. And we understand the hesitancy of adopting technology, considering the IT services cost. Today, you’ll learn how to get a functional IT solution (even in the MVP stage) and successfully debut in your target market, even with a startup budget.

In this article:
  1. Differences Between Startups
  2. Why Startups Benefit As They Outsource Custom Software Development
  3. Why In-House Development Falls Short Compared to Outsourcing?

Differences Between Startups

Let’s start with the basics and define what sets a startup apart from other types of businesses. Spoiler: a startup doesn’t always have to be a brand-new company.

In short, a startup is characterized by an idea with a unique concept. It can belong to either a group of enthusiasts entering crowdfunding (a grassroots startup) or be under the wing of an established company, such as Google (a corporate startup).

Key differences between grassroots and corporate startups are:

  • Budget: The budget of a grassroots startup is usually smaller compared to the resources provided by large corporations.
  • Prejudice: Typically, new startups break stereotypes and challenge the status quo.
  • Caution: For new entrepreneurs, reputation risks or competition are challenges they wish to overcome.
  • Trust credit: Corporations have their audience ready to support their new venture.
  • Ambition: Grassroots startups are not bound by restrictions, allowing them to raise stakes.
  • Problem-solving: While enthusiastic teams can afford to make mistakes and get back up, corporations risk their reputation if a startup fails.

Both corporate and grassroots startups can implement their IT projects using their staff or with the help of external companies. Statista analysts predict that by 2028, the outsourcing segment of digital solution development will reach $129.9 billion, which indicates the demand for this type of service among business representatives.

So, why do companies outsource?

Obviously, it’s for the advantages inherent only in this type of collaboration.

Why Startups Benefit As They Outsource Custom Software Development

Startup outsourcing is pretty much the norm these days. This model of development allows companies to grow without being distracted by processes unrelated to their core activities.

In other words, everyone should stick to what they’re good at. That is entrepreneurs should manage and scale their businesses. While developers should create digital solutions that fuel business growth.

Outsourcing aligns with this mindset. It allows dividing responsibilities, ensuring project efficiency and success.

Experts at AdvantISS have identified seven main reasons why companies outsource. They will help you understand the essence of outsourcing and determine if this collaboration model is suitable for your startup.

1. Speed to Market

The most significant advantage of outsourcing software engineering is the speed of delivering digital products.

Just compare. If you go with an in-house development team, it might take 3-4 weeks to assemble it. Then, integrating new team members may require an additional 2-3 weeks.

Also, you might redirect internal developers to tackle other tech issues, which will delay the project. So, you might get a ready product within 7-14 months.

External contractors typically focus solely on your project. They have teams ready to take on developing a digital product as soon as possible.

Since the outsourced team is already familiar with working together, they can dive directly into the project after a brief initial planning and briefing period, which might last a week or less. In total, it will take 4-9 months to build an application from scratch.

So, quicker team assembly, reduced or no integration phase, and a focused, experienced team usually lead to a faster time to market.

2. Development Cost

The average cost of developing a project in-house can range from $40,000 to $60,000. However, when outsourcing MVP development (a common tech solution for startups), the estimated cost falls between $5,000 and $20,000 per project.

Services from a startup outsourced development team can be very helpful for companies looking to preserve their budgets.

And when it’s time to scale your digital product, outsourcing makes more sense. It’s generally the best solution in terms of price, timing, and value.

3. Access to Talent Pool

Hiring technical personnel, whether for startups or well-established companies, can be daunting. It’s even harder when you’re looking for someone with niche skills.

Firstly, there’s the time spent on recruitment and onboarding. Secondly, you’ve got to think about all the costs—salaries, equipment, onboarding training, etc. Thirdly, what if down the line you don’t need as many specialists?

Outsourcing addresses all of these challenges. It lets you bring in qualified people just for the time you need them and with a flexible service pricing model. 

4. Overall Service Quality

When you outsource, remember that these service providers really care about their reputation. That is, they do everything possible to make sure you’re happy. So, as a startup owner, you can expect them to put their all into your project.

As a result, the digital product’s quality, including UI, functionality, security, and alignment with the audience and business needs, is going to be high. This is exactly what you need to stand out in your market.

5. Development Comprehensiveness 

Outsourcing software development for startups is an opportunity to get the whole package in one go. For example, if you go with the complete service package, you receive:

This comprehensiveness saves your time and nerves. Because doing in-house development means you have to manage these processes separately on your own. That is, you’d have to conduct comprehensive market research, then create the prototype, develop, test, and so on. And, most importantly, each step will require its own expert.

6. Process Allocation

Let’s keep it simple: stick to what you’re good at. If your startup is not tech-oriented, there is no need to force yourself to do tech stuff. Let the developers handle that. Instead, focus on business growth. 

This makes sense because:

  • You and your team focus on promoting the idea online and building valuable contacts.
  • The subcontractor creates your digital product (MVP), integrates technologies, and ensures compliance with business logic.
  • As a result, you launch a ready-made IT solution on the market, where a warmed-up audience awaits it.
  • Then, you attract investors to support your startup.
  • With additional funding, you scale the digital solution and increase profitability.

7. Savings on Post-Release Operations

After your product enters the market, you’ll receive initial feedback with suggestions from users. Thus, you’ll need to fix bugs, add new features, or maybe even change designs. So, what’s the plan? Handle all this yourself or delegate it to a vendor?

We recommend the second option, especially if you had external experts develop your product. The reason is simple: ongoing support often comes as part of their package.

The second advantage is that those developers know exactly how your software solution is implemented. So, they can make changes or scale it up more efficiently than anyone else.

Why In-House Development Falls Short Compared to Outsourcing?

Comparing in-house development with outsourcing, we have concluded that the latter option is more advantageous for startups. 

Sure, in-house development has its own benefits. It works best for companies that have complex needs that require close collaboration, constant tweaks, and deep integration with existing systems. For example, a large bank developing its mobile banking app would benefit from in-house development because of the sensitive nature of financial data and the need for tight security and compliance with financial regulations.

But startups usually need different things—they are looking for ways to launch quickly and cost-effectively. So, here’s why assembling an in-house development team proves to be an inefficient approach.


Maintaining an in-house team isn’t cheap. The equipment alone costs tens of thousands of dollars, as well as monthly office space rental and taxes. Moreover, the annual salary of one developer is around $136,295 in the USA, and the team consists of dozens of specialists with different profiles.

So, you’ve got to ask yourself: is your budget up for handling this kind of expense over a long period? If not, then outsourcing the IT project might be the best way to go.


The in-house team always has an abundance of tasks: supporting IT infrastructure, providing technical support to non-technical staff, and so on. On top of that, work on the development project. It’s a lot, and honestly, it doesn’t always pay off the way you’d hope.

Even if you already have an in-house development team, you can outsource part of the project (or even all of it). This will reduce the strain on resources and allow your team to get things done faster.


Being professionals in one area is awesome. But only until the team faces a task that’s outside your team’s comfort zone. For example, the need to work with a new third-party framework. Suddenly, things slow down, or worse, you might hit a wall with your project.

With outsourcing, the situation is different. Service providers often maintain a multi-profile team ready to tackle just about anything. This means whatever your project needs, they’ve got someone who can handle it.

Final Thoughts

For startups, it is more advantageous to work with external subcontractors rather than allocate a limited budget to form teams. Also, outsourcing is an excellent opportunity to bring your product to the market faster and ensure its bright future.

We hope you have found an answer to the question, “Why outsource software development?”. If you are ready to delegate your project, the AdvantISS team will gladly implement it.

Just leave a request with our manager, and we will contact you.